Question

Brad’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost- volume-profit analysis, t he shop owner has divided sales into two categories, as follows:

Seventy percent of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $ 148,500. (In the following requirements, ignore income taxes.)

Required: 1. Compute the unit contribution margin for each product type. 2. What is the shop’s sales mix? 3. Compute the weighted-average unit contribution margin, assuming a constant sales mix. 4. What is the shop’s break- even sales volume in dollars? Assume a constant sales mix. 5. How many bicycles of each type must be sold to earn a target net income of $ 99,000? Assume a constant salesmix.